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The decline in the value of some of its successful IPOs and the repression of China’s technology sector have led to a record loss.
SoftBank Group Corp. had a record loss in its Vision Fund unit Coupang Inc. and Didi Global Inc. because the value of public participations such as.
In the three months ended September 30, the unit accounted for 825.1 billion yen ($ 7.3 billion), surpassing the 788.6 billion yen loss of the business amid pandemic cancellations. Overall, the Tokyo-based company had a net loss of 397.9 trillion yen in the period.
Masayoshi Son’s Vision Fund has been a variable contribution of profit and loss since its inception in 2017. The first decline began in 2019 with the disappointing public debut of Uber Technology Inc. and the implosion of WeWork, the impact of the coronavirus.
Then, the global rise in technology stocks pushed the Vision Fund’s profits to new highs last year for three consecutive quarters, with South Korea’s e-commerce giant Coupang, U.S. DoorDash Inc. and China KE Holdings Inc. thanks to success lists made by online property platforms. Now the downturn in the value of some of these companies and the repression of the technology sector by Chinese regulators have brought the business back to red.
“If you look at the performance of the Vision Fund so far this year, everything they’ve brought to the market so far has lost money since it was listed,” Kirk Boodry, an analyst at Redex Research in Tokyo, said before the earnings forecast. “It simply came to our notice then. They have been behind many expensive IPOs. To invest, the company asks you if you break the whole cycle of making money after you make it public. ”
Shares of SoftBank are down about 24% this year.
SoftBank is losing millions of dollars
Coupang -6.7
Didi -6.1
KE Holdings -2.2
Full truck alliance -1.2
Zymergen -0.7
Unrealized losses in the valuation of public companies totaled $ 17.7 billion in the quarter in SoftBank’s two Vision Funds. Coupang was responsible for a loss of $ 6.7 billion. Two quarters earlier, South Korea’s e-commerce leader marked the best performance of Son since it was listed by Alibaba Group Holding Ltd., when it contributed $ 24.5 billion to the Vision Fund’s profits.
SoftBank’s portfolio of Chinese startups was particularly tough after the country’s regulators launched an attack on the technology sector. Didi, which debuted at the end of the previous quarter with one of the largest bids in the U.S. in the last decade, lost $ 6.1 trillion in the quarter and Full Truck Alliance Co. dropped $ 1.2 trillion on similar Uber truck startups.
KE Holdings Inc., which runs the Beike online property service, lost $ 2.2 billion in value. The unknown Chinese startup gave SoftBank an unprofitable profit of $ 5.1 billion when it was launched in August 2020, and in that quarter the Vision Fund’s profits took it to a new record. Even if the company is not directly targeted by regulators, its shares have fallen more than 70% to its peak and the IPO is trading below the price.
“Chinese regulators have no incentive to clean the air and publicly declare that the repression is over,” Boodry said. “This uncertainty about the future of Chinese technology may persist for some time.”
Public portfolio losses were offset by a profit of 455.9 trillion yen when SoftBank earned some of its most successful investments. SoftBank sold DoorDash shares worth $ 2.2 billion in August and raised about $ 1.69 billion in September from Coupang shares.
Son has also greatly reduced its controversial share and opportunity trading program, Amazon.com Inc., Taiwan Semiconductor Manufacturing Co. and liquidating its entire stake in PayPal Holdings Inc. ”Down $ 13.6 billion at the end of the previous quarter.
“For the next few quarters, we don’t have to wait long in the Vision Fund business,” Boodry said. “Sure, they may point to some upcoming IPOs, but all the negative noise drowns them out. And none of them will be as big as Didi. ”
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